Arizona Public Service Co., the state's largest electric utility, plans to phase out coal-fired generation in the 2030s as it moves toward a lower-carbon power portfolio with a large new fleet of solar-plus-storage arrays.
But the Pinnacle West Capital Corp. subsidiary, along with Arizona's other utilities, can exit coal much faster by relying more heavily on battery-backed solar farms, while also slashing emissions and saving customers billions of dollars, according to a new report released Sept. 17 that Berkeley, Calif.-headquartered Strategen Consulting LLC produced for the Sierra Club.
The study found that replacing 11 operating coal units totaling 4,792 MW at six plants owned by Arizona utilities — some of which are outside the state and are owned in part by other entities — with solar-plus-storage arrays by 2023, augmented with market purchases, can save Arizona electric customers $3.5 billion. The study does not examine the 2,250-MW Navajo or the 1,021-MW Cholla coal plants, which are already scheduled for retirement in 2019 and 2025, respectively.
The Navajo Generating Station in northern Arizona is set Source: Associated Press |
The analysis identified $2.8 billion in potential savings if the 11 coal units were replaced with market purchases alone. Substituting six of the 11 coal-fired generators with wind could save $263 million, the study found. Savings from replacing the coal generators with solar and batteries could exceed $10 billion when calculating the societal costs of greenhouse gas emissions and other factors, it added.
The report's findings align with several other recent reports on the uneconomic and declining state of U.S. coal-fired generation, which the coal lobby has sought to counter.
"I don't think there's anything in this report that will be surprising to utilities," Sandy Bahr, director of the Sierra Club's Grand Canyon chapter, said in an interview. "They know coal is not economical ... I think their biggest issue is the timeline."
Replacing the 1,540-MW Four Corners coal plant, majority-owned by APS, with battery-backed solar arrays would make financial sense for ratepayers, even accounting for a coal supply agreement with Navajo Transitional Energy Co. LLC that runs through 2031, according to the report.
In comparing levelized energy costs, the Strategen report pinned solar-plus-storage at $34/MWh, in line with recent contract prices in the Southwest, versus coal costs ranging from the mid-$40s to the mid-$60s per MWh. The analysis looked beyond a simple levelized cost of energy comparison, also incorporating, for instance, peak capacity values of coal alternatives and hourly market prices.
'A complex process often understated'
Responding to the report, utilities highlighted their commitment to reducing or completely replacing coal, through at a slower pace than envisioned in the report, and questioned the ability of renewables and storage to fill in all the gaps left by retiring coal.
An APS spokesman said the utility was still digesting the report's findings, but added that the company's latest draft integrated resource plan includes "an overall commitment to exit coal by 2038." While the utility intends to rely on renewables and natural gas to replace the energy lost as it transitions off coal, "additional capacity resources will be needed to cost-effectively meet peak load requirements," the utility said. "Those capacity needs are likely to be met with a combination of gas and energy storage."
While noting its limited review of the report, a spokesman for Tucson Electric Power Co. also sounded a note of caution.
"Long-term resource planning is a complex process often understated in third-party analysis," utility spokesman Joe Barrios said in an email.
The Fortis Inc. affiliate is working with the University of Arizona to develop greenhouse gas emissions reduction goals and to assess "the appropriate role of coal-fired resources in the future," Barrios added. Tucson Electric Power plans to retire 638 MW of coal resources, a 41% reduction, by 2023.
Even if Arizona utilities were to fully embrace an accelerated timetable to exit coal, it is far from certain that Arizona energy regulators would allow a rollout of energy storage at the necessary scale.
Following the catastrophic failure and explosion of an APS energy storage system in April, its second such incident involving lithium-ion battery storage, one member of the Arizona Corporation Commission has expressed serious concerns about the technology, while APS has put its energy storage plans on hold pending the completion of an investigation.

